Gregory Mannarino, AM 5/11/25
"Markets, A Look Ahead: A U.S. Debt Default May Be Close,
And The Fallout Will Rock The Earth"
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U.S. Debt Credit Default Swaps
How It Works: First, a Credit Default Swap (CDS) is a financial contract, its insurance on debt. A buyer pays a premium to a seller (typically a bank) for protection against default or payment disruption, in this case, on U.S. Treasuries. If the U.S. defaults or delays payment, the CDS seller pays out the insured party.
Who Sells the Insurance? Major global banks and financial institutions write CDS contracts. JPMorgan, Goldman Sachs, Citi, Barclays, Deutsche Bank, BNP Paribas, etc. They take on the risk, collecting premiums as long as no default occurs. Why? US debt is supposed to be 100% safe. But it's not.
If the U.S. Were to Default: What Happens to the Banks Holding CDS?
1. CDS Contracts Trigger Instantly: A U.S. default (even technical) would activate credit event clauses in CDS contracts. Banks that sold CDS (insurers) would owe massive payouts, instantly.
2. Unrealized Risk Becomes Real: Many banks never expected to actually pay on U.S. CDS, just to collect premiums. These “paper” liabilities now become cash obligations, forcing emergency capital injections or fire sales of assets.
3. Massive Liquidity Crunch: To cover payouts, banks would dump treasuries, stocks, or other high-quality assets, crashing markets across the board. Interbank lending could freeze overnight, just like in 2008, but much worse...
4. Counterparty Contagion: If one big bank can’t pay its CDS obligation, the loss ripples outward. Counterparties collapse. Derivatives implode. Systemic contagion begins.
5. Emergency Central Bank Intervention: The Fed and possibly foreign central banks step in with unlimited liquidity (QE on steroids) to prevent total collapse and offer a solution. A new system.
6. Global Derivatives Time Bomb Goes Off: Many CDS contracts are interlinked with other derivatives. A U.S. default would shake the entire global derivatives market, QUADRILLIONS in exposure suddenly unstable. If the U.S. defaults, the CDS market becomes a financial nuclear bomb, detonating first at the big banks, and then echoing through every corner of the global financial system.
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"$2.5 Quadrillion Disaster Waiting to Happen –
Egon von Greyerz"
By Greg Hunter’s USAWatchdog.com
"There is sufficiency in the world
for Man's need but not for his greed."
- Mahatma Gandhi
"Egon von Greyerz (EvG) stores gold for clients at the biggest private gold vault in the world buried deep in the Swiss Alps. EvG is a financial and precious metals expert. EvG is a former Swiss banker and an expert in risk. He says the risk in the global markets has never been this high.
EvG explains, “Credit has increased dramatically through derivatives. All instruments being issued now by banks, pension funds, stock funds, it’s all synthetic. There is no real underlying payments in anything almost. Therefore, my estimate for derivatives would be at least $2 quadrillion, and I think that is probably conservative. Then, we have debt on top of that of $300 trillion, and we also have a couple hundred trillion dollars of unfunded liabilities. So, we are talking about $2.5 QUADRILLION, and that’s with a global GDP of $88 trillion. So, there is a disaster waiting to happen, and especially because all this created money has created no value whatsoever. I always knew this would collapse, and it’s taken longer than I expected, but I think we are at the end of a major era.
These derivatives, at some point soon, will actually turn into debt. Central banks will have to cover all the outstanding liabilities of the commercial banks as we are seeing now with Credit Suisse, Bank of England and etc. This is going to happen across the board. Whether it’s called derivatives or called debt, as far as I am concerned, it’s the same thing. It will have the same effect on the world financial system, which will be disastrous, of course.”
EvG says the derivative markets were simply a way for financial institutions to carry debt and not show it on their balance sheets. In the end, everything will balance out. EvG goes on to say, “Nobody can repay the debt, and they can’t even pay interest. So, therefore, when the debt implodes, so will the assets that were financed by this debt. So, both sides of the balance sheet have to come down. Whether it comes down by 50%, 75% or 90%, I don’t know. All I think about is risk, and the financial system will not survive in its present form. Central banks only use one kind of medicine, and that is more printed money. Now, you are getting negative returns on printed money. So, that is not going to save anything.
Sadly we are looking at a situation when this system will start to implode. The rich are still rich, but the poor are really poor. Overall in the UK, Germany and most European countries, people don’t have enough money to live. This is a human disaster already. With food costs going up 25% and energy going up the same and gasoline, interest rates and rents, people don’t have enough money, and that is happening now. It’s a human disaster of mega proportions. It’s so sad, and governments will have no chance of doing anything about it. The risk is increasing exponentially, and it is going to get worse.” There is much more in the 43-minute interview.
Join Greg Hunter on Rumble as he goes One-on-One with Egon von Greyerz of Matterhorn Asset Management, which can be found on GoldSwitzerland.com.
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Did you really think they'd tell you the truth?
LOL LOL LOL
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